Post-Loan
Frequently Asked Questions
Questions that arise AFTER you
have obtained your VA guaranteed loan
Q: My home was appraised by VA and now I am
having problems with its condition. Wasn't the
appraisal an inspection of the property and can't VA
help me with these problems?
A: Although the VA fee appraiser must view
the property from both the exterior and interior to
determine its overall condition, the appraisal
process is not intended to be an "inspection" of the
property. While the appraiser is an experienced
observer, and is required to recommend needed
repairs based upon his or her observations while
completing the appraisal, the appraiser is not
expected to recommend cosmetic repairs, ensure that
mechanical, electrical and plumbing systems work
properly, climb on the roof, etc. VA cannot
guarantee that all defective conditions will be seen
by the appraiser, or that the property will
otherwise be satisfactory to the buyer in all
respects, and we have no authority to assist veteran
homeowners with the correction of defects in
existing homes. VA encourages homebuyers to satisfy
themselves that the home they intend to purchase is
in a condition that is acceptable to them.
Q: I purchased a newly constructed home that
was inspected by VA (or HUD/FHA) during construction
and I have complaint items which the builder is not
taking care of. Is there anything VA can do to help
me?
A: If the new home was inspected by a fee
compliance inspector assigned by VA or HUD during
construction, VA has complaint processing procedures
that are used to attempt to get the builder to
correct construction defects which the VA determines
are the builder's responsibility. A complaint must
be registered with VA within the first year of
ownership. Ultimately, VA does not have the
authority to force a builder to make corrections to
a property. Also, some problems about which a
veteran complains may be determined by VA to be
within minimum standards of acceptable building
practice. In such cases, VA will not look to the
builder for correction. However, when builders
refuse to correct items which VA determines are
their responsibility to correct, VA will take
administrative sanctions against them and refuse to
do further business with them. In the end, some
veterans may still need to pursue legal action
against the builder.
Q: My lender has increased my payments into
the escrow account for taxes and insurance. What can
I do?
or
Q: The amount my lender is collecting for
taxes and insurance doesn't seem right. What can I
do?
A: VA does NOT require lenders to maintain
escrow accounts. VA does require that lenders ensure
that the property is covered by sufficient hazard
insurance at all times and that property taxes are
paid. Most lenders decide to use escrow accounts to
do this, but they are not required by VA and VA has
no standards governing them.
They are governed by RESPA which is administered by
the US Dept. of Housing and Urban Development. For
more information, click
here.
Q: Does having a VA loan limit a veteran's
right or ability to sell the property?
A: No. A veteran may sell the property to a
veteran or non-veteran at any time. However, if the
loan was closed after March 1, 1988, and it will be
assumed, the qualifications of the assumer must be
reviewed and approved by the lender or VA.
Q: When a veteran sells the property to
someone who will assume the existing VA loan, is the
veteran released automatically from personal
liability for repayment of the loan?
A: No. If the loan was closed after March 1,
1988, the lender or VA must be notified and
requested to approve the assumer and grant the
veteran release from liability. If the loan was
closed prior to March 1, 1988, the loan may be
assumed without approval from VA or the lender.
However, the veteran is strongly encouraged to
request a release of liability from VA in order to
avoid owing a debt to the Government if the loan
assumer (or a subsequent assumer) fails to pay the
loan.
Q: If a veteran obtains a release of
liability, is restoration of entitlement automatic?
A: No. The assumer must not only qualify from
a credit and income standpoint, but he or she must
be a veteran with sufficient entitlement to
substitute for that used by the original veteran in
obtaining the loan and meet occupancy requirements.
Q: If a veteran has trouble repaying the
loan, what should he or she do?
A: It is best to talk with the lender as soon
as possible to explain why the payments are late and
when and how those late payments will be made. If
there was a job loss, divorce, or other serious
problem, and the regular monthly payments cannot be
made, then it may be best to sell the home to avoid
foreclosure. VA may be able to assist in arranging a
repayment plan or other alternative to foreclosure.
VA offers home loan counseling through its 9
Regional Loan Centers (RLCs). Call our toll-free
number (800-827-l000) to request a call-back from a
Loan Service Representative or click
here for the
phone number and address of the RLC closest to you.
Q: What is VA refunding?
A: When VA refunds a loan, the loan is
purchased from the private lender. VA only refunds a
loan when the veteran has had problems making the
payments due to circumstances beyond his or her
control, the problems have improved so that payments
can now be made or will be in the near future, but
the loan holder is not willing to wait before taking
action to terminate the loan. Refunding is rare
because most lenders prefer to work out the
problems, if at all possible, rather than selling
the loan to VA and thereby giving up the right to
future income from that loan.
Q: How does a VA compromise claim payment
work?
A: When a veteran attempts to sell his or her
home and the expected proceeds from the sale are not
enough to pay off the existing loan, and the veteran
has no other source of funds to complete the
transaction, a VA compromise claim pays the
difference. As with any claim payment by VA, the
veteran usually remains liable to VA for the amount
of the claim payment. However, the compromise claim
is usually less than the claim which would have been
payable if the sale had fallen through, the veteran
had failed to make the loan payments, and the lender
had foreclosed on the loan.
Q: If a veteran dies before the loan is paid
off, will the VA guaranty pay off the balance of the
loan?
A: No. The surviving spouse or other
co-borrower must continue to make the payments. If
there is no co-borrower, the loan becomes the
obligation of the veteran's estate. Mortgage life
insurance is available but must be purchased from
private insurance sources.
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